ShmoopTube

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principles of finance a la shmoop the big short wait the big short like

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the movie the one with Steve Carell and Christian Bale and that guy from lala [movie actors in a line]

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land yeah that's the one well we're gonna

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give you the quick and dirty plot summary why well because as outlandish [man drinks champagne in bathtub]

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as the story may seem all this really happened I'm gonna be summarizing from

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this bathtub a la Margot Robbie in the movie a because like why not and be

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because while I really need to exfoliate anyway okay so basically the big short [man exfoliates leg in bathtub]

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focuses on the investor who predicted the collapse of the housing bubble in

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2008 and he bet the ranch almost literally that the markets would [Christian Bale holding balloon]

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collapse he recognized that overly easy terms had been given to too many

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borrowers and that the market was poised for a massive correction to reflect the

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inability to pay of oh so many marginal borrowers yeah big bubble yeah kind of

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like that one by deeply analyzing the data and zeroing in on the ignorance and [stock market data]

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a quasi corruption of the players responsible for this financial crisis

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this hedge fund manager Michael burry who looks a little bit like Batman there [man working at computer in the dark]

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yeah realizes that a collapse is imminent and decides to warn everyone

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shouting from the rooftops that the economy is in major trouble and that

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people should sell and get out just kidding he totally does the opposite he

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quietly on his own figures out how to take best advantage of that situation

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for himself and his shareholders well that's what they hired him to do anyway

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right okay well how does he do this well he invests in a credit default swap and [writing on white board]

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starts essentially shorting the housing market much to the temporary dismay of

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his clients and even of the vaunted goldman sachs who he warns could almost

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go bankrupt and they literally laugh at him and they almost do to refresh

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shorting is the act of selling a security at say the par value of a

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thousand bucks in the case of a bond and then betting that you can buy it back

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later for say yeah 400 bucks at some future date in the same vein a credit

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default swap is basically life insurance sold by the issuer in this case mortgage

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selling banks such that if the bonds went bankrupt while the banks would be [bank on a hook in the ocean]

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on the hook not only for the bonds themselves but for the entire package of

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bonds and given mortgage portfolio well it turns

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out that Batman was right and a few others catch wise as well including the

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guy from lala land and the guy from 40 year old virgin they identify the

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culprit cdo's AKA collateralized debt obligations basically giant pools of [writing on white board]

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mortgages all packaged up in one investment vehicle

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they've been rated by the credit rating organizations like Moody's and SPS in

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the gang way higher than they should have been and it's the public's faith in

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these bogus loan packages that has been steadily driving the market over a cliff [cars driving over cliff]

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so in the end it was the ratings agencies and their tendency to hand out [trick or treaters on halloween]

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triple-a ratings like their Milky Way bars on Halloween that led to this

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horrible mortgage crisis that almost bankrupted our country well a lot of

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very smart and observant people made fortunes shorting all of this when they

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recognized it in advance while the rest of the world well had yet to uh figure

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it out and guess that's how Batman was able to afford his Batcave regardless

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this is a must watch movie for anyone who cares about government regulations

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irresponsible fiduciary dealings by banks and those evil money-grubbing

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bankers who just live to make the commission of another quick buck and if

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you're here because you were looking for the biopic of Danny DeVito you actually

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want to watch the little short

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